FTSE 100 riding high with biggest gains in 2016 so far
After an atrocious start to the year, the FTSE100 is finally fighting back.
January saw the FTSE 100 pummelled by worse-than-expected data from China and continued trouble in the oil sector. The stock market has also been affected by uncertainty over the upcoming European referendum, a large dip in mining (a sector that makes up an enormous part of the FTSE) and more gloomy indicators too numerous to mention.
The FTSE 100 closed yesterday at 6,362.89, up 1.93% from the start of the year, buoyed by an increase in commodity prices – good news for mining shares – and a rise in oil prices. Additionally, Chinese trade data was far better than expected (March exports in Yuan up 18.7% year-on-year).
However, this is global finance and the pendulum will always swing, and as Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “There are still risks out there. China is continuing its transformation from a manufacturing-led economy to one focused on the consumer, the UK will shortly be going to the polls to decide whether to remain part of the EU, and central banks in the US and UK will at some point have to start raising interest rates.”
We would also add that with Chinese data, caution is advised concerning the trustworthiness of such figures.
Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor says: “The current positive momentum in markets is predicated on cautious Federal Reserve policy and no imminent rate rises. Opinions at the Fed are somewhat divided on how gradual the path of rate normalization should be, with doves advocating two or fewer moves late this year, but hawks sticking to December's plan of four rate hikes. This divergence of views between various Fed members is an underlying worry, but markets are viewing it as more of a future problem rather than a current concern.”
- If you’d like to start investing this year, read How to invest in 2016: the basics.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.